NAFTA - Exceptions

                                 PART NINE
                             OTHER PROVISIONS

                            Chapter Twenty-One

                                Exceptions



Article 2101: General Exceptions

1.   For purposes of:

     (a) Part Two (Trade in Goods), except to the extent that a
 provision of that Part applies to services or
 investment, and

     (b) Part Three (Technical Barriers to Trade), except to the
 extent that a provision of that Part applies to
 services,

GATT Article XX and its interpretative notes, or any equivalent
provision of a successor agreement to which all Parties are
party, are incorporated into and made part of this Agreement.
The Parties understand that the measures referred to in GATT
Article XX(b) include environmental measures necessary to protect
human, animal or plant life or health, and that GATT Article
XX(g) applies to measures relating to the conservation of living
and non-living exhaustible natural resources.

2.   Provided that such measures are not applied in a manner that
would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions
prevail or a disguised restriction on trade between the Parties,
nothing in:

     (a) Part Two (Trade in Goods), to the extent that a
 provision of that Part applies to services,

     (b) Part Three (Technical Barriers to Trade), to the extent
 that a provision of that Part applies to services,

     (c) Chapter Twelve (Cross-Border Trade in Services), and

     (d) Chapter Thirteen (Telecommunications),

shall be construed to prevent the adoption or enforcement by any
Party of measures necessary to secure compliance with laws or
regulations that are not inconsistent with the provisions of this
Agreement, including those relating to health and safety and
consumer protection, or

3.   Provided that such measures are not applied in an arbitrary
or unjustifiable manner, or do not constitute a disguised
restriction on international trade or investment, nothing in
Article 1106(1)(b) or (c) or (3)(a) or (b) (Performance
Requirements) shall be construed to prevent any Party from
adopting or maintaining measures, including environmental
measures:

     (a) necessary to secure compliance with laws and
 regulations that are not inconsistent with the
 provisions of this Agreement;

     (b) necessary to protect human, animal or plant life or
 health; or

     (c) necessary for the conservation of living or non-living
 exhaustible natural resources.


Article 2102: National Security

1.   Subject to Articles 607 (Energy) and 1018 (Government
Procurement), nothing in this Agreement shall be construed:

     (a) to require any Party to furnish or allow access to any
 information the disclosure of which it determines to be
 contrary to its essential security interests;

     (b) to prevent any Party from taking any actions that it
 considers necessary for the protection of its essential
 security interests

     (i) relating to the traffic in arms, ammunition and
 implements of war and to such traffic and
 transactions in other goods, materials, services
 and technology undertaken directly or indirectly
 for the purpose of supplying a military or other
 security establishment,

     (ii) taken in time of war or other emergency in
 international relations, or

     (iii) relating to the implementation of national
 policies or international agreements
 respecting the non-proliferation of nuclear
 weapons or other nuclear explosive devices;
 or

     (c) to prevent any Party from taking action in pursuance of
 its obligations under the United Nations Charter for
 the maintenance of international peace and security.

Article 2103: Taxation

1.   Except as set out in this Article, nothing in this Agreement
shall apply to taxation measures.

2.   Nothing in this Agreement shall affect the rights and
obligations of any Party under any tax convention.  In the event
of any inconsistency between the provisions of this Agreement and
any such convention, the provisions of that convention shall
prevail to the extent of the inconsistency.

3.   Notwithstanding paragraph 2:

     (a) Article 301 (Market Access - National Treatment) and
 such other provisions of this Agreement as are
 necessary to give effect to that Article shall apply to
 taxation measures to the same extent as does Article
 III of the GATT, and

     (b) Article 315 (Market Access - Export Taxes) and Article
 604 (Energy - Export Taxes),

shall apply to taxation measures.

4.   Subject to paragraph 2:

     (a) Article 1202 (Cross-Border Trade in Services - National
 Treatment) and Article 1407 (Financial Services -
 National Treatment) shall apply to taxation measures on
 income, capital gains or on the taxable capital of
 corporations, and to those taxation measures set out in
 Annex 2103.4 that relate to the purchase or consumption
 of particular services, and

     (b) Articles 1102 and 1103 (Investment - National Treatment
 and MFN), Articles 1202 and 1203 (Cross-Border Trade in
 Services - National Treatment and MFN) and Articles
 1407 and 1408 (Financial Services - National Treatment
 and MFN) and shall apply to all taxation measures,
 other than those on income, capital gains or on the
 taxable capital of corporations and those taxes listed
 in Annex 2103.4,

except that nothing in those Articles shall apply

     (c) any most-favored-nation obligation with respect to an
 advantage accorded by a Party pursuant to a tax
 convention,

     (d) to a non-conforming provision of any existing taxation
 measure,

     (e) to the continuation or prompt renewal of a non-
 conforming provision of any existing taxation measure,

     (f) to an amendment to a non-conforming provision of any
 existing taxation measure to the extent that the
 amendment does not decrease its conformity, at the time
 of the amendment, with any of those Articles,

     (g) to any new taxation measure aimed at ensuring the
 equitable and effective imposition or collection of
 taxes and that does not arbitrarily discriminate
 between persons, goods or services of the Parties or
 arbitrarily nullify or impair benefits accorded under
 those Articles, in the sense of Annex 2004, or

     (h) to the measures set out in Annex 2103.4.

5.   Subject to paragraph 2 and without prejudice to the rights
and obligations of the Parties, Article 1106(3), (4), (5) and (6)
(Performance Requirements) shall apply to taxation measures.

6.   Article 1110 (Expropriation) shall apply to taxation
measures except that no investor may invoke that Article as the
basis for a claim under Article 1116 or 1117, where it has been
determined pursuant to this paragraph that the measure is not an
expropriation.  The investor shall refer the issue of whether the
measure is not an expropriation for a determination to the
appropriate competent authorities set out in Annex 2104.6 at the
time that it gives notice under Article 1119.  If the competent
authorities do not agree to consider the issue or, having agreed
to consider it, fail to agree that the measure is not an
expropriation within a period of six months after such referral,
the investor may submit its claim to arbitration under Article
1120.

Article 2104: Balance of Payments

1.   Nothing in this Agreement shall prevent a Party from
adopting or maintaining measures that restrict international
transactions or related international transfers and payments
("transfers") where the Party experiences serious balance of
payments difficulties, or the threat thereof, and such
restrictions are:

     (a) consistent with paragraphs 4 through 8 when imposed on
 cross-border trade in financial services; or

     (b) consistent with paragraphs 2 through 6 when imposed on
 any other transaction or transfer.

2.   Restrictions imposed on transactions or transfers other than
cross-border trade in financial services shall:

     (a) when imposed on payments for current international
 transactions, be consistent with Article VIII(3) of the
 Articles of Agreement of the International Monetary
 Fund ("IMF");

     (b) when imposed on international capital transactions, be
 consistent with Article VI of the Articles of Agreement
 of the IMF and imposed only in conjunction with
 measures imposed on current international transactions
 under paragraphs 2(a) and 4(a); and

     (c) when imposed on transfers covered by Article 1109
 (Investment - Transfers) and transfers related to trade
 in goods, be made in a freely usable currency at a
 market rate of exchange such that the payments and
 transfers are not substantially impeded.

3.   No Party may adopt or maintain measures such as tariff
surcharges, quotas or licenses under this Article.

4.   As soon as practicable after imposing a restriction under
this Article, the Party imposing the restriction shall:

     (a) submit any current account exchange restrictions to the
 IMF for review under Article VIII of the Articles of
 Agreement of the IMF; and

     (b) enter into good faith consultations with the IMF on
 economic adjustment measures to address the fundamental
 underlying economic problems causing the difficulties
 and receive endorsement of such measures by the IMF.

5.   Each Party shall ensure that any measure that it adopts or
maintains under this Article shall:

     (a) avoid unnecessary damage to the commercial, economic
 and financial interests of another Party;

     (b) not be more burdensome than necessary to deal with the
 balance of payments difficulties or threat thereof;

     (c) be temporary and be phased out progressively as the
 situation improves;

     (d) be consistent with any economic adjustment measures
 endorsed by the IMF under paragraph 4(b) and consistent
 with the Articles of Agreement of the IMF; and

     (e) be applied on a national treatment and
 most-favored-nation treatment basis.

6.   A Party may adopt or maintain a measure under this Article
that gives priority to services which are more essential to its
economic program, provided that, except as specifically approved
under an IMF-endorsed adjustment program in effect under
paragraph 4, no such measure is imposed for the purpose of
protecting a specific industry or sector.

7.   A Party imposing a restriction on cross-border trade in
financial services shall:

     (a) not impose more than one measure on any given
 transaction and its related transfer, except as
 specifically approved under an IMF-endorsed adjustment
 program;

     (b) promptly notify the other Parties; and

     (c) consult promptly with the other Parties to assess the
 balance of payments situation of the Party and the
 measures it has adopted, taking into account among
 other elements

     (i) the nature and extent of the balance of payments
 and external financial difficulties of the Party,

     (ii) the external economic and trading environment of
 the Party, and

     (iii) alternative corrective measures that may be
 available.

8.   In consultations under paragraph 7(c), the Parties shall:

     (a) consider if measures adopted under this Article comply
 with paragraph 5, in particular subparagraph 5(c); and

     (b) accept all findings of statistical and other facts
 presented by the IMF relating to foreign exchange,
 monetary reserves and balance of payments, and shall
 base their conclusions on the assessment by the IMF of
 the balance of payments and external financial
 situation of the Party adopting the measures.


Article 2105: Disclosure of Information

     Nothing in this Agreement shall be construed to require a
Party to furnish or allow access to information the disclosure of
which would impede law enforcement or would be contrary to laws
protecting personal privacy.


Article 2106: Cultural Industries

     Annex 2106 applies to cultural industries.


Article 2107: Definitions

For purposes of this Chapter:

cultural industries means any person engaged in any of the
following activities:

     (a) the publication, distribution, or sale of books,
 magazines, periodicals or newspapers in print or
 machine readable form but not including the sole
 activity of printing or typesetting any of the
 foregoing;

     (b) the production, distribution, sale or exhibition of
 film or video recordings;

     (c) the production, distribution, sale or exhibition of
 audio or video music recordings;

     (d) the publication, distribution or sale of music in print
 or machine readable form; or

     (e) radio communication in which the transmissions are
 intended for direct reception by the general public,
 and all radio, television and cable broadcasting
 undertakings and all satellite programming and
 broadcast network services;

international capital transactions means "international capital
transactions" as defined under the Articles of Agreement of the
IMF;

payments for current international transactions means "payments
for current international transactions" as defined under the
Articles of Agreement of the IMF;

tax convention means a convention for the avoidance of double
taxation or other international taxation agreement or
arrangement; and

taxes and taxation measures do not include:

     (a) a "customs duty" as defined in Article 319; or

     (b) the measures listed in exceptions (b), (c), (d) and (e)
 of that definition.

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                              ANNEX 2103.4

                        Specific Taxation Measures


1.   Article 2103(4)(a) (Taxation) shall apply to an asset tax
under the Asset Tax Law ("Ley del Impuesto al Activo") of Mexico.

2.   Article 2103(4)(a) and (b) shall not apply to any excise tax
on insurance premiums adopted by Mexico to the extent that such
tax would, if levied by Canada or the United States, be covered
by Article 2103(4)(d), (e) or (f).

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                               ANNEX 2104.6

                           Competent Authorities


1.   The competent authority for Canada is the Assistant Deputy
Minister for Tax Policy, Department of Finance.

2.   The competent authority for Mexico is the Deputy Minister of
Revenue of the Ministry of Finance and Public Credit.
(Secretaria de Hacienda y Credito Publico)

3.   The competent authority for the United States is the
Assistant Secretary of the Treasury (Tax Policy), U.S. Department
of the Treasury.

=============================================================================

                                ANNEX 2106

                            Cultural Industries


     Notwithstanding any other provision of this Agreement, as
between the United States and Canada, any measure adopted or
maintained with respect to cultural industries, except as
specifically provided in Article 302 (Market Access - Tariff
Elimination), and any measure of equivalent commercial effect
taken in response, shall be governed exclusively in accordance
with the terms of the Canada - United States Free Trade
Agreement.  The rights and obligations between Canada and any
other Party with respect to such measures shall be identical to
those applying between Canada and the United States.